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Do Commodity Index Traders Destabilize Agricultural Futures Prices?

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Author

Summary, in English

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the intensive investment activities of commodity index traders(CITs) have destabilized agricultural futures markets. Using a stochastic volatility model, we treat conditional volatility as an unobserved component, and analyze whether it has been affected by the expected and unexpected open interest of CITs. However, with respect to twelve increasingly financialized grain, livestock, and soft commodities, we do not find robust evidence that this is the case. We thus conclude that justifying a tighter regulation of CITs by blaming them for more volatile agricultural futures markets appears to be unwarranted.

Publishing year

2013

Language

English

Publication/Series

Applied Economics Quarterly

Document type

Journal article

Publisher

Duncker & Humblot

Topic

  • Probability Theory and Statistics

Keywords

  • Commodity Index Traders
  • Futures Prices
  • Agricultural Markets

Status

Inpress

ISBN/ISSN/Other

  • ISSN: 1611-6607